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73

Information Notice No. 93­73: Criminal Prosecution of Nuclear

Suppliers for Wrongdoing

UNITED STATES

NUCLEAR REGULATORY COMMISSION

OFFICE OF NUCLEAR REACTOR REGULATION

WASHINGTON, D.C. 20555

September 15, 1993

NRC INFORMATION NOTICE 93‐73: CRIMINAL PROSECUTION OF NUCLEAR SUPPLIERS

FOR WRONGDOING

Addressees

All NRC licensees.

Purpose

The U.S. Nuclear Regulatory Commission (NRC) is issuing this information

notice to inform addressees of the results of the criminal prosecutions of two

cases of wrongdoing that the NRC staff referred to the U.S. Department of

Justice (DOJ). Licensees and their suppliers are also reminded of the

penalties that could result from the intentional violation of Federal

regulatory requirements and criminal statutes. In particular, suppliers,

licensees, and individual employees could be subject to criminal prosecution

by the DOJ if they intentionally violate Federal regulatory requirements. It

is expected that recipients will review the information notice and consider

actions, as appropriate, to avoid similar problems. However, suggestions

contained in this information notice are not NRC requirements; therefore, no

specific action or written response is required.

Description of Circumstances

Case 1: In May of 1993, the president and vice president/manager of Satin

American Corporation were sentenced in United States District Court (District

of Connecticut) on criminal charges; specifically, Section 371 of Title 18 of

the United States Code (18 U.S.C. 371), "Conspiracy to Traffic in Goods

Bearing Counterfeit Marks." They had pled guilty to participating in a

conspiracy from 1985 to 1987 in which circuit breakers and related equipment

were refurbished at their Shelton, Connecticut, facility. This equipment was

sold to various NRC licensees and others bearing counterfeit nameplates made

to look like those from the original manufacturers. The Satin American

president was sentenced to 4 years of imprisonment, which was suspended, and

3 years probation. The conditions of probation were restitution, a $250,000

fine, 400 hours of community service each year of probation, and barring of

the president, Satin American Corporation, and any related or successor

companies controlled by him from engaging in nuclear safety‐related business

for 5 years. The Satin American vice president/manager was sentenced to

3 years of imprisonment, also suspended with 3 years probation, 200 hours of

community service each year of probation, a $5,000 fine, and he was barred
from nuclear safety‐related business for 3 years. Information on the

associated equipment problems can be found in IN 89‐45 "Low‐Voltage Metalclad

9309100054.

IN 93‐73

September 15, 1993

Page 2 of 3

Power Circuit Breakers Refurbished with Substandard Parts," and its

Supplements 1 and 2.

Case 2: On November 6, 1992, the president of J and S Machine and Valve and

former partner in Coffeyville Valve, Incorporated, was indicted by a grand

jury in Tulsa, Oklahoma, for 11 counts citing violations of 18 U.S.C. 371,

2320, 1341, and 1343. These counts included conspiracy, copyright

infringement, mail fraud, and wire fraud. The defendant was alleged to have

refurbished used valves and affixed counterfeit Crane Company labels in an

effort to mislead customers, including NRC licensees, to believe they were

receiving unused valves manufactured by Crane. On March 16, 1993, the

defendant pled guilty to charges of conspiracy to traffic in counterfeit goods

in violation of 18 U.S.C. 371. On May 18, 1993, in United States District

Court (Northern District of Oklahoma), the defendant was found guilty.

Imposition of sentence was suspended, but the defendant was placed on

probation for 3 years and fined $15,000. Information can be found in

IN 92‐56, "Counterfeit Valves in the Commercial Grade Supply System."

Discussion

All personnel involved in NRC‐regulated activities, including licensees,

suppliers, and their employees, have a responsibility to comply with

applicable NRC regulatory requirements and other Federal laws. The NRC

demands compliance and will seek criminal prosecution of wrongdoing in cases

of willful violations of these requirements. As evidenced by the cases cited

herein, criminal sanctions may include imprisonment, fines, restitution of

monies, and rendering of community services.

In addition, the "Deliberate Misconduct" provisions, in Title 10 of the

Code of Federal Regulations [10 CFR 30.10, 40.10, 50.5, 61.9(b), 70.10, and

72.12] allow the NRC to take direct enforcement action against suppliers

and/or their responsible officers and/or their employees for deliberately

causing a licensee to be in violation of Commission regulations or for

providing false information to licensees or the Commission concerning licensed

activities.

Furthermore, as indicated in numerous NRC generic communications, in addition

to bearing counterfeit markings, much of the equipment in cases such as the

ones cited above has been found to have been sold in unsatisfactory condition,

or to contain substandard parts, manufacturing processes or workmanship. Some

of this equipment has failed in service or testing. Inasmuch as some of this

equipment is sold as basic components as defined in 10 CFR Part 21, "Reporting

of Defects and Noncompliance," and some of it is represented as new and

deviations in the equipment are deliberately not disclosed to the purchasers,

directors or responsible officers of suppliers of such equipment could also be

subject to civil penalties as described in 10 CFR 21.61. In addition, as

provided in Section 21.62 of the revision of 10 CFR Part 21, published

November 24, 1992, criminal sanctions could be imposed in accordance with

Section 223 of the Atomic Energy Act of 1954, as amended. Although not.

IN 93‐73

September 15, 1993

Page 3 of 3
required by this notice, addressees may wish to distribute copies of this

information notice to their employees and suppliers.

This information notice requires no specific action or written response. If

you have any questions about the information in this notice, please contact

one of the technical contacts listed below, the appropriate Office of Nuclear

Reactor Regulation project manager, or the appropriate regional office.

/S/'D BY BKGRIMES

Brian K. Grimes, Director

Division of Operating Reactor Support

Office of Nuclear Reactor Regulation

Technical contacts: Stephen D. Alexander, NRR

(301) 504‐2995

Ronald K. Frahm, Jr., NRR

(301) 504‐2986

Joseph J. Petrosino, NRR

(301) 504‐2979

Kevin M. Ramsey, NMSS

(301) 504‐2534

Attachments:

1. List of Recently Issued NMSS Information Notices

2. List of Recently Issued NRC Information Notices

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